Caring For Those Who Serve

Puerto Rico Puerto Rico Methodist ChurchMethodist Church

Presented by: Manuel VargasPresented by: Manuel Vargas

OverviewOverview

• PRCRSP PRCRSP

• Personal savings into PRPIPPersonal savings into PRPIP

• Investment returnsInvestment returns

• Benefits Access toolsBenefits Access tools

• Participant servicesParticipant services

• Proposed change to PRCRSP defined Proposed change to PRCRSP defined benefitbenefit

PRCRSP: Defined PRCRSP: Defined Contribution PlanContribution Plan

2% Match2% Match 2% UMPIP2% UMPIP

PRCRSP11% Non-match

PRCRSP11% Non-match

PLUS

*100% of UMPIP contributions up to2% of compensation

EFFECTIVE 01/01/13

PRUMPIPPRUMPIP

• Not all clergy making personal Not all clergy making personal contributionscontributions

• Not receiving the full 13% Not receiving the full 13% contribution (receiving 11%)contribution (receiving 11%)

• Missing out on the additional 2% Missing out on the additional 2% contribution AND investment returnscontribution AND investment returns

Investing Early Pays OffInvesting Early Pays Off

$0

$50,000

$100,000

$150,000

$200,000

$250,000

5 10 15 20 25 30 35 40

Total

Contributions

YearsYears

$ 1,000 per year at 7% average earnings

Stable Value Fund

Inflation Protection Fund

Fixed Income Fund

Multiple Asset Fund

Balanced Social ValuePlus Fund

U.S. Equity Fund

International Equity Fund

Investment OptionsInvestment Options

16.5%

34.3%

20.1%

17.1%

-0.7%

-6.6%

2.0%

-10.0% 0.0% 10.0% 20.0% 30.0% 40.0%

General Board Competitive General Board Competitive ReturnsReturnsYear-to-DateYear-to-Date: December 31, 2013: December 31, 2013

SVFSVF

IPFIPF

FIFFIF

MAFMAF

BSVPFBSVPF

USEFUSEF

IEFIEF

Updating Your ContributionUpdating Your Contribution

• Before-Tax and Before-Tax and After-Tax After-Tax Contributions Contributions AgreementAgreement

• Percentage or Percentage or dollar amountdollar amount

• Can increase or Can increase or decrease throughout decrease throughout the yearthe year

Before-Tax or After-Tax Before-Tax or After-Tax ContributionsContributions

Before-TaxBefore-Tax

•Federal income tax deferred until Federal income tax deferred until distributiondistribution

After-TaxAfter-Tax

•Pay federal income taxPay federal income tax

Deferred Taxation on Deferred Taxation on EarningsEarnings

The earnings on your The earnings on your account balance are account balance are not taxed until you not taxed until you begin taking your begin taking your benefits benefits

2014 Elective Contribution 2014 Elective Contribution Limits Limits

Before-Tax Limit: Before-Tax Limit: $$15,00015,000Catch-up (age 50+):Catch-up (age 50+): $$ 1,5001,500

Savings Goal—Savings Goal—$500,000 at Retirement*$500,000 at Retirement*

Age 35Age 35• 30 years30 years• $452 per month$452 per month• Age 65: Age 65:

$500,000$500,000

Age 45Age 45• 20 years20 years• $1,000 per month $1,000 per month

• Age 65: $500,000Age 65: $500,000

*7% average rate of return and savings in retirement plan

How Much Income Is How Much Income Is Enough?Enough?

Replacement ratio:Replacement ratio:•Percentage of current income you Percentage of current income you need to “replace” at retirement to need to “replace” at retirement to meet your expected retirement meet your expected retirement expensesexpenses

•Usually 70% to 85% of income Usually 70% to 85% of income just before retirementjust before retirement

Where Will My Retirement Where Will My Retirement Income Come From?Income Come From?

PRCRSPPRCRSPSpouse Spouse RetirementRetirement

OtherOther PRPIPPRPIP

Social SecuritySocial Security

Benefits Access Benefits Access

Social security

UMPIP

Other Retirement

Other

Benefits Benefits Access Access

• Account balancesAccount balances

• Contributions coming inContributions coming in

• Investment informationInvestment information

• Personal/Address informationPersonal/Address information

• Beneficiary designationsBeneficiary designations

Participant ServicesParticipant Services

• LifeStage Investment Management Service option that selects funds and rebalances as needed

• LifeStage Retirement Income option that turns an account balance into monthly payments designed to last a lifetime and keep up with inflation

• Ernst & Young Financial Planning Services available for financial counseling on a variety of topics including debt management and retirement planning

All the above services provided at no charge to the participantAll the above services provided at no charge to the participant

LifeStage Investment LifeStage Investment Management ServiceManagement Service

LifeStage Investment Management LifeStage Investment Management Service (LifeStage)—Managed AccountsService (LifeStage)—Managed Accounts

Risk Risk toleranctoleranc

ee AgeAge

Social Social Security Security eligibilityeligibilityValue of Social Value of Social

Security Security benefitsbenefits Target AllocationTarget Allocation

* Defined contribution * Defined contribution (DC)(DC)

LifeStage—DC AccountsLifeStage—DC Accounts

LifeStage Retirement LifeStage Retirement IncomeIncome

• Helps participants manage Helps participants manage distributionsdistributions

Enrollment—Set Aside MoneyEnrollment—Set Aside Money

LifeStage Retirement IncomeLifeStage Retirement Income— — Annual ProcessAnnual Process

• Annual adjustment calculated each November Annual adjustment calculated each November and reflected in January paymentand reflected in January payment

• Participant receives letter detailing change in paymentParticipant receives letter detailing change in payment

• Payments are generally expected to increase—Payments are generally expected to increase—but a decrease is possiblebut a decrease is possible

Payment Safety Zone

$758 / month

Ernst & Young Financial Ernst & Young Financial

Planning Services Planning Services

Program AdvantagesProgram Advantages

• Confidential, expert advice at no charge Confidential, expert advice at no charge

• Unlimited hours of financial planning adviceUnlimited hours of financial planning advicevia telephonevia telephone

• Financial planners (Ernst & Young, LLC)Financial planners (Ernst & Young, LLC)

• Objective advice—no sales pitchObjective advice—no sales pitch

• No need to enroll—just call No need to enroll—just call 1-800-360-25391-800-360-2539or go online to set up an appointmentor go online to set up an appointment

• Free website: Free website: http://gbophb.eyfinancialplanner.comhttp://gbophb.eyfinancialplanner.com(company code:(company code: gbophb gbophb; company program: ; company program: gbophbgbophb))

Consultation TopicsConsultation Topics

• Creating a retirement planCreating a retirement plan

• Choosing retirement plan investmentsChoosing retirement plan investments

• Buying a homeBuying a home

• Developing an estate planDeveloping an estate plan

• Managing debtManaging debt

• Funding children’s educationFunding children’s education

• OtherOther

PRCRSP Defined BenefitPRCRSP Defined BenefitExample: DAC = $65,186Example: DAC = $65,186

Clergyperson with 6 years of Clergyperson with 6 years of service in PRCRSP service in PRCRSP (01/01/07 – (01/01/07 – 12/31/2012)12/31/2012)

1.25%x $65,186x 6$4,888.95

$4,888.95÷ 12

$407.41

Proposed ChangeProposed Change

• Freeze the DAC at 2014 level: Freeze the DAC at 2014 level: $65,186$65,186

Rationale for Proposed Rationale for Proposed ChangeChange

• Increases in the DAC increases the Increases in the DAC increases the contributions/liability for the PRMCcontributions/liability for the PRMC

• Assuming 3% increases in DAC the Assuming 3% increases in DAC the PRMC is underfunded by PRMC is underfunded by $1,391,134$1,391,134

• Freezing the DAC reduces the Freezing the DAC reduces the underfunded amount by an underfunded amount by an estimated 10% - 17%estimated 10% - 17%

1-800-851-22011-800-851-2201www.gbophb.orgwww.gbophb.org